Croat tobacco firm sees double-digit fall in sales

ZAGREB, March 26 (Reuters) - Croatia's sole tobacco producer, TDR, said on Thursday it expected a double-digit fall in sales this year due to higher excise duties on local tobacco products, which the government imposed under EU pressure.

Earlier this month the government decided to end the preferential treatment of local tobacco manufacturers and tax local and foreign cigarettes equally, as part of its European Union accession drive.

The measure, under which excise duties on TDR's products rose 27 percent, will take effect on June 1.

"From April 1, we will increase prices of almost all of our products by 2 kuna to offset higher excise taxes. Without that our revenues this year would fall some 450 million kuna ($81.73 million), or 30 percent down from 2008," TDR's Chief Executive Davor Tomaskovic told reporters.

Even with the increase, TDR still expects a double-digit fall, he said.

TDR, one of the most profitable Croatia's firms, is a part of Adris Grupa ADGR.ZA which is also involved in tourism. TDR's market share in Croatia is 85 percent, while it takes some 27 percent of the market in former Yugoslavia.

Its shares closed at 184.99 kuna on Wednesday and have not been traded on Thursday.

Tomaskovic complained that, unlike the EU newcomers who fought for adjustment periods, Croatia had decided to harmonise its legislation with the EU several years before it is to become a member, which may have a negative impact on the local market.

"Besides higher prices and lower sales, we're likely to see an increase in illegal trade and citizens buying cigarettes across the border. Local tobacco growers will also be worse-off as until now we were buying tobacco in Croatia although its prices were 30 percent higher than abroad," Tomaskovic said.

The price of the most popular TDR's product, Ronhill, in Croatia will from April amount to 18 kuna. In other former Yugoslav republics, it costs at between 7.50 and 7.80 kuna. ($1=5.506 Croatian Kuna) (Reporting by Igor Ilic, editing by Zoran Radosavljevic and Mike Nesbit)